Golden State Water turns down Claremont's offer to buy its local holdings

CLAREMONT - Golden State Water Co. has rejected Claremont's formal offer to purchase the assets in the city for more than $54 million.

The city had sent an offer on Nov. 6 to Golden State proposing to purchase its Claremont assets for $54,067,000.

But Golden State responded Nov. 26 with a rejection letter from George M. Soneff, an attorney from Manatt, Phelps & Phillips, LLP.

"As Golden State Water has previously advised the City, its assets, which are utilized to provide water service to the public, are not for sale," said the letter. "Nor is Golden State Water interested in selling its water rights in the Claremont area."

Golden State Water has been the focus of anger in Claremont after it originally submitted an application to the state Public Utilities Commission asking an increase of more than 24 percent in 2013 and additional increases in 2014 and 2015.

A negotiated settlement over the increases resulted in Claremont's 11,000 customers and ratepayers receiving a 15.1 percent rate increase in 2013, 2 percent more in 2014 and 1.8 percent in 2015.

As a result of such increases, the City Council has voted to begin efforts to purchase the firm's assets in the city. Some consideration of obtaining those assets by eminent domain have also been discussed by the city.

Soneff's letter said the more than $54 million offer "is but a fraction of the fair market value of Golden State Water's assets."

Claremont's offer also fails to meet the requirements of the Government Code, said Soneff. He noted "that no appraisal has been conducted as to the fair market value of Golden State Water's water rights, despite the fact that the materials accompanying your letter suggest the City may attempt to seize those rights through eminent domain."

Soneff said that even if the "legal defects" in the letter are repaired, the takeover effort by the city will result in "costly litigation" including paying for the Golden State's attorneys fees and other litigation costs if it loses in court.

If assets are obtained by the city through eminent domain proceedings, the letter continues, residents "would be saddled with decades of payments to satisfy the debt the City would incur for the payment of current market value for Golden State Water's system and water rights, in addition to the considerable legal and consulting expenses incurred by the City in a protracted condemnation action."

The letter ends with Soneff writing that "we hope City leaders will realize that collaboration would be far more productive than spending the City's time and taxpayer dollars to pursue a risky and costly takeover plan." It suggests officials should meet with City representatives to discuss ways to work together.

A statement from the city Friday in response to the letter, in part, says the city's offer was made in "strict compliance" with state of California laws governing property acquisition and reflected the opinion of a qualified appraiser who established fair market value.

Additionally, the city is "continuing to move forward" in evaluating options to acquire the water utility and "the city will be accepted the publicly-traded water company offer to meet."

Lastly, the Claremont officials are "unable to comment further" because it is the subject of "confidential, closed sessions discussions regarding property acquisition, as prescribed by State law."